Australia Must Re-Order its Economic Priorities

The new Commonwealth government is hosting a major Jobs Summit in September 2022, bring together representatives from a range of stakeholder groups to discuss the challenges facing Australia's labour market, and how to achieve strong employment, job quality and security, and better skills and training opportunities.

In preparation for the Summit, the Australian Council of Trade Unions is publishing a series of discussion papers to spark dialogue over key issues that will be discussed at the event. The first of these papers, on the failures of past macroeconomic policy and the need for better approaches, was prepared with input from Jim Stanford, Director of the Centre for Future Work. 

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The latest taxation statistics reveal the massive gender pay gap across the whole economy

The 2019-20 taxation statistics released this week by the ATO provide a plethora of data that reveals with precision the salaries of people by location, occupation age and importantly, gender. 

Labour market and fiscal policy director, Greg Jericho, undertook a deep dive into the data. He notes in his column in Guardian Australia that in 91% of over 1,000 separate occupation groups from Nightclub DJ through to Magistrates and Judges, men have a higher median income than do women. 

The data reveals that women are less likely to work in higher paying occupations, and perhaps more damning those occupations with high levels of female participation are more likely to be low paid than are jobs which are mostly done by men.

It is clear that work traditionally done by women is much lower paid than stereotypically traditional male jobs. 

But it is not just those occupations where the imbalance occurs. Even in jobs where women are the majority of workers, men will likely have a higher median salary and be more likely to be paid over $90,000 a year and be within the top two tax brackets. 

Women for example make up 57% of a journalists, and yet account for just 46% of all journalists earnings between $90,000 and $180,000 and a mere 36% of those earning above $180,000.

The data highlights that the gender pay gap is not just about being paid the same hourly rate for the same work, but who gets the opportunity to work more hours, and who is more likely to be given roles that pay higher wages.

It reveals a deep structural issue within our economy in which even in jobs largely done by women, the men in those occupations will most likely be paid more. 


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Interest Rate Hikes Will Hurt Workers to Protect Profits

The Reserve Bank of Australia has hiked its interest rate 4 times so far this year, for a combined total of 1.75 percentage points. And it has signaled more increases are ahead, as it joins other central banks around the world in rapidly increasing rates to slow spending power, job-creation, and hence inflation.

In this commentary, Centre for Future Work Associate Dr Anis Chowdhury challenges the wisdom of this strategy. Since current inflation is related more to supply chain disruptions and other global pressures, higher interest rates will do more harm than good -- and shift national income even further toward the owners of capital, instead of working Australians.

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The Economics of Paid Leave for Domestic and Family Violence

As one of its first legislative acts, the new Commonwealth government is proposing to provide 10 days of paid leave for victims of family and domestic violence, as a right enshrined in Australia's National Employment Standards. This will provide victims of FDV with important economic security as they work to address or escape their situations. Access to such leave has been shown to be effective in reducing the subsequent incidence of violence, and assisting victims and their families in rebuilding their lives.

The legislation comes on the heels of an initial decision by the Fair Work Commission to enshrine 10 days paid FDV leave as a provision in Modern Awards.

Our Director, Dr Jim Stanford, appeared as an expert witness last year before the FWC inquiry on this matter. He presented testimony estimating the ultimate impact of 10 days paid FDV leave on total labour costs in the Australian economy. He found that the final impact of this provision on total labour costs was almost too small to be measured (equivalent to an increase in labour costs of one-sixtieth of one percent -- not enough to be visible in aggregate economic data). These costs are easily outweighed by the economic benefits of reducing the incidence of FDV.

Dr Stanford's full expert report is available here (as originally published by the FWC as part of its Family and domestic violence leave review 2021).

The Job Summit needs to produce a fairer labour market

Despite unemployment at nearly 50 years lows, it will be little suprise to workers that wages growth is only at 3 year highs. Over the past decade the relationship between wages growth and unemployment has shifted such that levels of unemployment that would have once seen wages growing at more than 4% are now associated with growth of well below 3%.

This has not happened by accident or some "invisible hand" of the free market. Decades of industrial relations legislation has purposefully reduced the ability for workers to organise and bargain for better wages. 

Labour market policy director, Greg Jericho writes in Guardian Australia that we are now also seeing for the first time a shift in the relationship between wages and underutilisation.

These changes have meant that employees are recieving ever smaller slices of the national income pie.

The past 24 years have also displayed that theory of increasing productivity resulting in better wages, works better in the economic textbook than reality. In just 7 of those 24 years, have real wages outgrown productivity - and 4 of those year were because of highly unusal cases of productivity actually declining. 

The Job Summit in September needs to be a time for a reset - a time to acknowledge that the labour market is not fairly weighted and that workers are not getting their fair share. 

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Will "curing" inflation cause a recession?

Right now, the big numbers of the economy look pretty good. Unemployment in June was just 3.5% - the lowest since 1974. So why has consumer confidence crashed and why are so many Australians worried about a recession? 

Labour market and fiscal policy director, Greg Jericho writes in Guardian Australia that the rising level of inflation, which combined with low wages growth has led to massive falls in real wages, has many Australians wondering if increasing interest rates is going bring the economy to a halt.

He writes that for now a recession is unlikely, but the risks remain. Previous periods of sharply increasing rates have been followed by rising unemployment, and the current market expectations for the cash rate rising above 3.5% within a year would certainly create a massive brake on the economy. 

The story from overseas is also worrying, with the United States battling even higher inflation than Australia and suggestions that the market is already pricing in a recession. 

It all highlights that while today's labour force figures are on the surface very promising, they also show just how affected the economy continues to be by the pandemic. Nearly 300,000 employed in June worked zero hours because of sickness or injury - well over double the usual amount. 

The nearly 50-year low unemplyment rates are also failing to lead to wages growth anywhere near what would have been expected in previous years, let alone at a level that is keeping up with inflation. 

While inflationary pressure do remain, the risk that the Reserve Bank will raise rates too high and too fast remains very much in place - especially given the lack of wages growth. 

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Employer Arguments Against Minimum Wage Boost Don't Hold Water

The Fair Work Commission has announced an important increase in the national minimum wage, which will rise by $1.05 per hour (or 5.2%) effective 1 July 2022. This represents a significant shift in the debate over wages in Australia, whichi have been languishing for years -- and are now falling in real terms.

Even with this new increase, however, real wages for the lowest-paid Australian workers are likely to go backwards this year, with inflation pegged to accelerate to as much as 7%. Nevertheless, Australia's business lobby are repeating tired old complaints about minimum wages being too high, stoking further inflation, and undermining profits.

In his latest commentary, published in The Guardian, Policy Director Greg Jericho reviews and debunks these predictable complaints. The evidence is clear that wages are not causing inflation. Profit margins have grown along with prices. Workers deserve to have their real incomes protected, as the true sources of the problem (arising mostly from after-effects of the pandemic and the global energy price shock) are addressed.

Please see Greg's full column, "Workers and their wages are the collateral damage of the war on inflation."

Wages, Prices and the Federal Election

The recent federal election featured important debate regarding the rising cost of living in Australia, and whether and how wages should be boosted to keep up with higher prices. One exchange, late in the campaign, occurred when ALP leader Anthony Albanese stated his belief that wages should keep up with prices -- but then was strongly criticised for that view by Coalition leaders and some business commentators.

New exit poll results from the Australia Institute indicate that a very strong majority of voters (83%) in fact support the idea that wages should at least keep up with prices. This opinion was shared broadly across the political spectrum. Even 79% of Coalition voters supported lifting wages to at least keep up with inflation.

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The recovery needs to deliver for workers

The latest labour account survey released by the Bureau of Statistics revealed that while job growth remains solid and the job vacancy rate is at record levels, workers real incomes remains at best flat. 

As we now enter a phase where the Reserve Bank is raising interest rates in an effort to reduce demand in the economy and keep down inflation and prices and wages, labour market policy director, Greg Jericho, notes in his Guardian Australia column that workers risk seeing their real wages continue to fall.

It is clear that the major pressures for inflation have come not from labour costs but from the input costs of goods and material. While these costs have been passed on to consumers, there has been much less flow through to workers. 

While the Reserve Bank notes that there are some signs of rising wages, these will inevitably be reduced due to the impacts of rising interest rates. 

After a year in which real wages have plummeted, the recovery is very much looking like one where company profits have risen, but where workers will miss out on wage growth that would undo the damage of the past year. 

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Enterprise Bargaining System no Longer Fit for Purpose

The collapse in agreement coverage under Australia's enterprise bargaining system in Australia in recent years, particularly in the private sector, has focused attention on the need for reforms that will give more workers the effective ability to collectively negotiate better wages and conditions. In the private sector, coverage by a current enterprise agreement has fallen by half since 2013: to below 11% of all workers by March 2021. No wonder wages are lagging so far behind inflation.

The new Commonwealth government has pledged to find ways to strengthen collective bargaining. In this feature interview with the ABC's national economics program The Business, Senior Economist Alison Pennington discusses the reasons why the current system is not working, and some of the reforms that will be required to support bargaining and lift wages.

Alison Pennington on ABC


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